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Macroeconomic Drivers of Bond and Equity Risks / John Y. Campbell, Carolin Pflueger, Luis M. Viceira.
- Format:
- Book
- Author/Creator:
- Campbell, John Y.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20070.
- NBER working paper series no. w20070
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- Our new model of consumption-based habit formation preferences generates loglinear, homoskedastic macroeconomic dynamics and time-varying risk premia on bonds and stocks. Consumers' first-order condition for the real risk-free interest rate takes the form of an exactly loglinear consumption Euler equation, commonly assumed in New Keynesian models. Estimating the model separately for 1979-2001 and 2001-2011 explains why the exposure of US Treasury bonds to the stock market changed from positive to negative. A change in the comovement between inflation and the output gap explains changing bond risks, but only when risk premia change endogenously as predicted by the model.
- Notes:
- Print version record
- April 2014.
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